Gold Rises as Growth, Debt Concerns Boost Demand

Gold rose above $1,900 an ounce on speculation that economic growth will slow and Europe’s debt woes will worsen, boosting demand for a protection of wealth.
European equities dropped after an election loss for German Chancellor Angela Merkel’s party spurred concern that support for bailing out Europe’s indebted nations may fade. Bullion jumped 3.1 percent on Sept. 2, the most in almost four weeks, as data showed the U.S. jobs market stalled in August, prompting renewed speculation that the country’s economy may be headed for a recession.
“With the implications of Friday’s U.S. payrolls report and intense focus on European sovereign issues this week, gold has two strong reasons to rally,” Edel Tully, a London-based analyst at UBS AG, wrote in a report. “Additional evidence of U.S. economic weakness raises the likelihood that the Federal Reserve will announce further easing this month. As European woes reclaim center-stage and in turn investor nervousness extends, these factors will support gold in the coming weeks.”
Gold for immediate delivery gained $17.82, or 0.9 percent, to $1,900.70 an ounce by 7:06 p.m. in London, after touching $1,903.52. The metal set a record at $1,913.50 on Aug. 23. In New York, gold futures for December delivery were up $26, or 1.4 percent, at $1,902.90 on the Comex, after touching $1,908.40. Floor trading in the U.S. was closed today for the Labor Day holiday.
The metal fell to $1,895 in the afternoon “fixing” in London, used by some mining companies to sell output, from $1,896.50 at this morning’s fixing.
Bull Market
Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 33 percent this year, outperforming global stocks, commodities and Treasuries. The metal climbed to a record priced in euros and British pounds today.
Merkel’s party yesterday suffered its fifth election loss this year after the chancellor failed to sway voters in her home state with a campaign based on her handling of the euro area’s debt crisis. European investor confidence fell to the lowest level in more than two years in September, a report showed today.
European sovereign-debt risk rose to a record based on closing prices, according to traders of credit-default swaps. World Bank President Robert Zoellick said in Beijing on Sept. 3 that the global economy is entering a “new danger zone” amid Europe’s debt difficulties.
Growth Concerns
“U.S. growth concerns and euro-zone debt concerns continue to overshadow markets,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report. Gold will be supported by “investors seeking to diversify from the volatile flows in equities.”
Gold exchange-traded-product holdings fell for a third day on Sept. 2, declining 1.7 metric tons to 2,142.4 tons, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8.
Silver for immediate delivery declined 0.5 percent to $43.0375 an ounce. Platinum rose 0.2 percent to $1,888 an ounce. Gold’s rally pushed its price above platinum today. An ounce of platinum bought 1.19 ounces of gold on average this year, data compiled by Bloomberg show. Palladium fell 1.3 percent to $764.50 an ounce.